Sun Hydraulics Second Quarter Earnings Per Share of $0.07 Exceeds Expectations

SARASOTA, FLA, August 8, 2001 - Sun Hydraulics Corporation (NASDAQ: SNHY) today announced that net income was $0.4 million for the quarter ended June 30, 2001. This compares with net income of $1.0 million last quarter and $1.4 million for the quarter ended July I, 2000. Net sales for the quarter ended June 30, 2001, were $17.5 million, a decrease of 7.6% from last quarter and 20.5% from the same quarter last year. Basic and diluted earnings per share were $0.07 for the second quarter of 2001, compared to $0.22 and $0.21, respectively, for the same period last year.

"The decline in order rates experienced in March and April has continued through July. Orders for the second quarter decreased 17% from the first quarter," said Sun Hydraulics President, Allen Carlson. "Our business largely follows U.S. manufacturing capacity utilization. The index that measures capacity utilization continues to drop and is at its lowest level in 17 years. Net sales for the third quarter are projected to decrease between 7% and 10% from the second quarter. At these sales levels, net income for the third quarter would approximate breakeven.

"I was pleased with the operational performance this quarter because we were able to keep direct production costs generally in line with the lower shipment level," said Carlson. "Our cash flow remains strong and our efforts are directed toward: 1) preparations that will ensure excellent customer service when business conditions improve, 2) marketing programs to increase demand through customer awareness of Sun's products, and, 3) the expansion of European operations.

"The United States manufacturing sector has been in decline for a year. Considering the interest rate reductions by the Federal Reserve, coupled with the decline in energy prices and decreasing inventory levels, we expect an upturn in the business cycle during the fourth quarter. Historically, our business slows early in the downturn and increases at the beginning of an upturn," concluded Carlson.

Sun Hydraulics Corporation will broadcast its 2nd quarter 2001 financial results conference call with analysts live over the Internet at 2:30 P.M. E.T., today, August 8, 2001. To listen, go to

Sun Hydraulics Corporation is a leading designer and manufacturer of high performance screw-in hydraulic cartridge valves and manifolds for worldwide industrial and mobile markets. For more information about Sun, please visit our website at


Certain oral statements made by management from time to time and certain statements contained herein that are not historical facts are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and, because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements, including those in Management's Discussion and Analysis of Financial Condition and Results of Operations are statements regarding the intent, belief or current expectations, estimates or projections of the Company, its Directors or its Officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company's strategies regarding growth, including its intention to develop new products; (ii) the Company's financing plans; (iii) trends affecting the Company's financial condition or results of operations; (iv) the Company's ability to continue to control costs and to meet its liquidity and other financing needs; (v) the declaration and payment of dividends; and (vi) the Company's ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will occur.

Important factors that could cause the actual results to differ materially from those in the forward-looking statements include, among other items, (i) the economic cyclicality of the capital goods industry in general and the hydraulic valve and manifold industry in particular, which directly affect customer orders, lead times and sales volume; (ii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iii) changes in the competitive marketplace that could affect the Company's revenue and/or cost bases, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; (iv) changes in technology or customer requirements, such as standardization of the cavity into which screw-in cartridge valves must fit, which could render the Company's products or technologies noncompetitive or obsolete; (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; and (vi) changes relating to the Company's international sales, including changes in regulatory requirements or tariffs, trade or currency restrictions, fluctuations in exchange rates, and tax and collection issues. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-Q for the quarter ended June 30, 2001, and under the heading "Business" and particularly under the subheading, "Business Risk Factors" in the Company's Form 10-K for the year ended December 30, 2000. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.



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